Bosnia clears last obstacles to progress towards EU, win IMF deal

SARAJEVO, July 31 (Reuters) - Bosnia's rival leaders agreed on Sunday on the key conditions set by the European Union for accepting the country's membership application and cleared the way for winning a much needed IMF loan deal, which was delayed three weeks ago.

Bosnia, an ethnically divided Balkan nation beset by economic woes, applied to join the 28-nation EU in February and hoped Brussels would consider its membership bid at its ministerial council in mid-July but was scuppered by disputes.

Without the prospect of membership, Bosnia would have risked being left behind by its neighbours who also emerged from the break-up of the former Yugoslavia and who either already belong to the bloc or are far further down the road to joining.

"We solved today a set of issues which open the way for the acceptance of Bosnia's (EU) application, ... but also open the way towards the IMF arrangement," said Bakir Izetbegovic, the leader of the Muslim Bosniak largest SDA party and chairman of the country's three-man inter-ethnic presidency.

The autonomous Serb Republic in Bosnia had opposed two key reforms -- a deal expanding a trade agreement Bosnia had with Croatia to cover all members of the EU and an effective coordination mechanism with Brussels.

Meanwhile, Bosniak leaders declined to sign a letter of intent with the IMF, prompting the lender to delay the consideration of the deal that was scheduled for mid-July by its Executive Board.

The trade objections were dropped after Germany intervened and promised help to the country as a whole, and the Serb Republic, in particular to ease the effects of the deal on farmers.

And on Sunday, at an EU-initiated meeting, leaders of the largest Bosniak and Serb political parties agreed to overcome the disputes. The Serbs agreed on the mechanism to deal with the EU and the Bosniaks signed the IMF deal.

The Serbs also accepted a country-wide transportation strategy, which they had opposed, and which was a condition of the EU for the approval of more than a billion euros for the construction of a network of highways and roads.

Sources close to the IMF have said the next meeting of the Executive Board, which could consider the approval of a three-year 550 million euro ($614.57 million) loan agreement for Bosnia, could be held in September. ($1 = 0.8949 euros) (Reporting by Daria Sito-Sucic; Editing by Alison Williams)